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Summers drops bid to head the Fed

Facing strident opposition from women’s groups and fellow Democrats, Obama administration economic confidante Lawrence H. Summers removed his name from consideration to the head the Federal Reserve, the White House said late Sunday.

“Earlier today, I spoke with Larry Summers and accepted his decision to withdraw his name from consideration,” President Barack Obama said in a statement. “Larry was a critical member of my team as we faced down the worst economic crisis since the Great Depression, and it was in no small part because of his expertise, wisdom and leadership that we wrestled the economy back to growth and made the kind of progress we are seeing today.”

Summers was Secretary of the Treasury at the end of the Clinton administration, and headed the White House’s National Economic Council during Obama’s first term. Widely respected in economic circles, his abrasive ways and ill-chosen comments made Summers few friends in Washington as Obama considered him over a woman who’d be the first to become the world’s most powerful banker.

Seeming to acknowledge that, Summers noted in his letter removing himself from consideration that “any possible confirmation process for me would be acrimonious” and potentially tarnish the Fed.

Until Sunday, he appeared to have support from the one person who mattered most, Obama. That support cost Obama politically, as women’s groups, especially the National Organization for Women, were furious that he appeared ready to pass over an accomplished woman, current Fed Vice Chairman Janet Yellen.

“On absolute facts and merits, she is better than any of the men,” Terry O’Neill, president of the National Organization for Women, told McClatchy just days before Summers withdrew. “For the president to pass her by is exactly what women’s organizations have been struggling against for decades. How dare he hold himself up as a proponent of women’s rights then slam a glass ceiling on Janet Yellen’s head?”

Yellen served as Fed governor from 1994 to 1997, then moved to head Clinton’s Council of Economic Advisers until 1999. Before becoming vice chairman of the Fed, she served as president of the Federal Reserve Bank of San Francisco.

NOW endorsed Yellen in late July, although the Fed chairmanship isn’t actually a post for which you seek endorsements.

Chairman Ben Bernanke’s term ends in January. The autonomous Federal Reserve has strived to steer clear of politics, but the very unusual public spat over Obama’s potential choices made that difficult.

Liberals also opposed Summers because of his Wall Street connections and his role in allowing a legal change in 2000 that opened the door for the financial alchemy that almost brought down the global financial system in summer 2008.

“The truth is that it was unlikely he would have been confirmed by the Senate,” said Sen. Bernie Sanders, I-Vt. “What the American people want now is a Fed chairman prepared to stand up to the greed, recklessness and illegal behavior on Wall Street, not a Wall Street insider whose deregulation efforts helped pave the way for a horrendous financial crisis and the worst economic downturn in the country since the Great Depression.”

“Larry Summers’ past decisions to deregulate Wall Street and do the bidding of corporate America has made the lives of millions of Americans more acrimonious,” Adam Green, co-founder of the Progressive Change Campaign Committee. “He would have been an awful Fed Chair. President Obama should appoint someone to lead the Fed who has not accepted millions in payments from Wall Street, and who will prioritize an economy that works for the little guy above further enrichment for the big guy.”

It’s not just that Obama would be passing up the widely respected Yellen. It’s that in Summers he’d be picking a man who in 2005 was effectively fired from the presidency of Harvard University for comments that women may lack an “intrinsic aptitude” for science and engineering. It was a way of suggesting that women aren’t genetically as smart as men.

Those comments didn’t stop Obama from naming Summers his National Economic Council chief in 2008, despite the protests of women’s groups.

Though commenting on the exit by Summers, the White House did not say whether Obama supports Yellen. Obama himself recently mentioned Donald Kohn, who preceded Yellen as vice chairman of the Fed, as a potential candidate too.

Many influential economists support Yellen. An open letter to Obama in support of Yellen has been circulated by the Institute for Women’s Policy Research, with more than 300 economists signed on as of Sept. 8. They included Nobel Prize winning economist Joseph Stiglitz, former Fed Vice Chairman Alan Blinder, a Princeton University professor, and Alice Rivlin, the Fed’s first female vice chairman.

In an interview Friday, Rivlin said she supported Yellen because of her long tenure at the Fed and because she has the traits of a good Fed leader.

“A good chairman, he’s a good listener, he works very hard to build a consensus. At the same time, he’s a decisive leader, he’s not a first among equals,” said Rivlin.

Those were not traits Summers had. He was known for having little patience for those who didn’t share his views. In terms of policy, his economic view was not very different than Yellen’s, but his close relationship with Obama made him a strong Fed candidate.

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